RBC leads Canadian banks in beating estimates on record profit

Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce joined the country’s other lenders in topping analysts’ estimates for third-quarter earnings, lifted by record profits in domestic consumer lending and wealth management.

Canada’s largest bank reports record earnings in personal and commercial banking and wealth management. Read more

Royal Bank, Canada’s largest lender by assets, reported Thursday that net income for the period ended July 31 rose 2.9% to a record $2.3 billion, or $1.52 a share. Toronto-Dominion, the second-biggest bank, said profit fell 10% to $1.53 billion, or $1.58 a share, after taking insurance losses tied to severe weather claims. Canadian Imperial, the fifth largest, said profit rose 5.8% to $890 million, or $2.16 a share.

“It’s a return to business as usual for the Canadian banks,” Tom Lewandowski, an analyst at Edward Jones & Co., said in a telephone interview. “All of these banks said they would see a slowdown in 2013 and it doesn’t seem to be happening.”

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The three Toronto-based banks posted record profit in Canadian personal and commercial banking and wealth management even as near record-low interest rates and tight net interest margins proved challenging for lenders. Royal Bank and Toronto-Dominion raised their dividend, joining Bank of Nova Scotia and Canadian Western Bank in hiking the quarterly payout.

“The Canadian banks have shown tremendous strength and resilience,” Colleen Johnston, Toronto-Dominion’s chief financial officer, said Thursday in an interview. “But the operating environment is challenging.”

Banque Internationale

Royal Bank said profit excluding some items was $1.48 a share, beating the $1.38 average estimate of 13 analysts surveyed by Bloomberg. Toronto-Dominion reported adjusted profit of $1.65 a share, topping the $1.53 average estimate of 11 analysts, and Canadian Imperial said adjusted profit was $2.29 a share, compared to the $2.13 average estimate of 14 analysts.

Royal Bank benefited from a 51% increase in profit from its wealth-management unit as fund sales and improving stock markets lifted fee-based client assets. The lender also added contributions from its RBC Investor Services custodian business after buying out partner Banque Internationale a Luxembourg SA in July 2012. Royal Bank raised its quarterly dividend 6.3% to 67 cents.

Profit from Royal Bank’s personal- and commercial-banking unit rose 7.1% to $1.18 billion and wealth management posted $236 million in profit. Insurance earnings fell 11% to $160 million, while profit from the RBC Capital Markets investment-banking business declined 9.6% to $388 million on lower revenue from advising on stock sales and mergers, and declines in trading revenue.

Insurance Losses

Toronto-Dominion posted record profit in Canadian wealth management as well as its Canadian and U.S. retail-banking businesses, according to Johnston. The bank raised its dividend 4.9% to 85 cents a share.

Toronto-Dominion said adjusted profit from Canadian lending rose 12% to $997 million and profit from U.S. retail banking advanced 23% to $445 million. Earnings from its investment-banking unit fell 18% to $147 million, the lender said.

Toronto-Dominion’s gains were tempered by insurance losses on flood claims, which drove profit from its wealth management and insurance unit down to $7 million, from $360 million a year earlier. Rain-swollen rivers caused flooding in southern Alberta in June and a record deluge in Toronto submerged parts of Canada’s most populous city on July 8, contributing to a $243 million loss for TD Insurance in the quarter.

Share Buyback

Canadian Imperial’s earnings were aided by a 34% gain in its wealth-management unit, as well as increases in investment banking and record profit in Canadian retail banking.

Consumer-lending and business-banking earnings climbed 7.4% to a record $638 million from a year earlier. Profit from CIBC’s wealth-management unit rose to a record $102 million from a year earlier after buying the private-wealth business of MFS McLean Budden a year ago from Sun Life Financial Inc. Income from investment banking advanced 39% to $217 million, helped by a 42% increase in trading revenue.

CIBC said in a separate statement that it plans to buy back as many as 8 million shares, or 2% of its stock.